Stop exploiting subcontractors

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Stop exploiting subcontractors

The relationship between large companies and their parts suppliers or outsourced subcontractors operates usually with a top-down hierarchical structure. Small companies rely heavily on orders and work they get from large companies. One of the keystones of the new government’s goal to ensure economic democratization is removing some of the inequalities smaller enterprises endure from their large contractors.

A recent report by the National Police Agency underscored how menacing and high-handed large companies can be in treating their subcontractors. According to the police, Kumho Petrochemical is charged with cooking up tax bills worth 11.5 billion won ($10.6 million) to demand from its subcontractors. It issued the invoices to subcontractors to beef up revenue figures after it launched its construction supply business. An executive of the company also allegedly demanded rebates worth 550 million won in exchange for granting contracts and orders. One department official was given 30 million won to treat workers for dinners and used it for his own pocket money.

Subcontractors have no choice but to put up with such unfair and overbearing practices from large companies in order to maintain their business relationship.

But the harm on small enterprises is turning fatal. One company went bankrupt because their false tax invoice was considered debt and its owner’s house was seized by the court. But Kumho Petrochemical maintains that it can’t do anything. It argues that it was the work of an executive during a vacancy in management.

It explained that the false tax invoicing is a kind of advance revenue transaction in order to boost performance. So who can account for the wrongdoings by some of the executives and employees in large companies? Kumho must respond with more responsibility and sincerity for the wrongdoings of its former and current employees as they stem fundamentally from an unfair business arrangement and tradition between large companies and their subcontractors.

In order to break the glass ceiling for small- and mid-sized companies and enhance economic justice, it is more urgent to ensure application of the current system and laws and remove unfair business practices before coming up with a new set of policies. Large companies must answer the call on fair trade and business. They must stop exploiting their subcontractors for their own self-interests.

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